Home Ownership and Labor Mobility

Alex Tabarrok discusses some academic work that shows a declining inter-regional mobility in the United States which is causing local economic declines to last much longer than they used to last.

In a new paper, also cited by Leubsdorf, Danny Yagan at Berkeley suggests that reduced migration is only part of the problem. What has made the aftermath to the 2008-2009 recession so bad is that migration is low at the same time that it has become more necessary than ever. The 2008-2009 recession was especially localized, it hit some places harder than others and in a way that appears to be permanent. But migration has been too slow to solve the problem.

The usual story is that in-and-out migration equalizes wage, unemployment and employment rates across the nation. Some places may be harder hit than others but movement quickly makes the US into one labor market. In the aftermath of this recession, however, that isn’t happening for employment rates. Using a clever research design that looks at workers with similar education and skills doing the same jobs at the same large firms but in different locations, Yagan finds that location continues to matter years after the recession has ended. Workers who worked in the places hardest hit in the 2007-2009 recession have employment rates today that are 1% lower than similar workers in regions that were less hard hit.

It is probably unfair for me to comment on this because I have been highly mobile in  my life, having lived and worked in about 10 places as diverse as Houston, Dallas, Boston, Boulder, Seattle, Phoenix, St. Louis.  However, I will take  a shot at this.  Some of my hypotheses:

  1. Government programs to encourage home ownership have reduced mobility.  It is simply harder to move if one has a house to sell, and this was worse in the last recession, which was driven in large part by falling home prices, which made it even harder to move when one has an underwater home to sell.
  2. Political/Cultural redlining reduces mobility.  As an example, certain millennials want to be nowhere else but San Francisco, despite how absurdly hard it is to live there.  They will starve in poverty there before going to, say, Houston, which is an easy place to live when one is young but which many consider to be a evil redneck backwater.
  3. Use of Communication technology causes people to think they can reduce mobility when they perhaps can't.  I think a lot of folks with modern communication technology assume that location is irrelevant and that they should be able to do X work anywhere they want.   I think they are overestimating where many industries and companies are right now (though they may be correct in the future).  Just from tax compliance and regulatory perspectives, it is pure hell for a company in, say, Texas to have an employee in, say, California.  Plus I think there are still real networking and management reasons for employees to be concentrated in facilities.

 

  • Solomon Foster

    First thing which occurs to me is two-earner couples. It's bad enough to have to relocate yourself. But taking your spouse of out a nice job as well?

  • Noumenon72

    You always produce some unique hypotheses I haven't seen before. Others I've seen:
    * the Internet lets you discover things are not that great elsewhere either, as opposed to hopping on a bus and having to make something of yourself.
    * state occupational licenses don't transfer, so you can't move
    * they won't build housing where any of the good jobs are

    Steve Sailer offered this thought:

    Historian
    Susan J. Matt wrote a fine book in 2011 called “Homesickness: An
    American History.” Most people feel homesickness when they move, but in
    19th Century America the culture acknowledged and validated such
    feelings, while 20th Century American culture criticized such feelings
    and encouraged a stiff upper lip because frequent moves were a part of
    the culture of national organizations, like the military and big
    corporations.

    I think the trend is moving back toward being more rooted.

    Perhaps one reason for the whole tech industry crowding into Silicon
    Valley is, if you can afford the immense real estate costs, you can
    enjoy a job-hopping career without having to move your kids.

  • Brennan

    Hi Noumenon72. I think I like your comment. However, I do take issue with what you quoted Steve Sailor as saying, vis-à-vis "...frequent moves were a part of the culture of national organizations, like the military..."

    Military moves have never been a significant form of labor mobility. Read this article from 538 (http://fivethirtyeight.com/datalab/what-percentage-of-americans-have-served-in-the-military/) and you will see that an almost infinitesimal number of military people have been mobile due to labor requirements. Also, military labor tends to be quite specific (how many tank maintainers or ejection seat technicians are required world-wide?), and not subject to local labor needs.

    I don't dismiss your point or Mr. Sailor's, but the inclusion of military moves to make his point is false beyond reason.

    Cheers,
    Brennan

  • Craig Loehle

    Another factor: many companies have a pension plan structured so that if you leave after 10 or 15 years you lose most or all of your pension. People get locked in and won't leave for a better job.
    The prejudice about place is not just San Fran. I have mentioned to several young people that there are jobs galore in the Dakotas and they get a horrified look. When people lived closer to the edge of hunger, they would go anywhere and take any job, but now life is more comfy, and moving to the middle of nowhere...no thanks.

  • smilerz

    I'm guessing that licensing significantly impacts it as well since professional certifications don't typically cross state lines.

  • Noumenon72

    Dakotas makes more sense for an older person. A young person shouldn't give up the opportunities for networking and mating that populated areas offer; they'd be throwing away a chance at a good life. Now an older person, with fewer friends, fewer activities, no need to provide for kids, and no prospects at improving their life much... I should move to the Dakotas.

  • Noumenon72

    I just thought it was a culture thing. Like, does traveling for your work mean you're low status, like a shepherd, or high status, like a jet setter? Does going into banking mean you're a high flyer, or a money grubber? Different cultures have different attitudes toward stuff like leaving home when you grow up, and back when airplanes were sexy and interstates weren't a thing, maybe traveling for the military was respected.

  • Craig

    I agree that there is more interest these days in quality of life type of issues. That's why all the hipsters move to Portland, even though there aren't good jobs. The same kind of interest in lifestyle and/or family proximity applies to regular people, too.

  • irandom419

    Item 3 is one that I ponder a bit. A normal company wouldn't locate back office operations in a high rent district, but places like Google and Amazon do.